LUXEMBOURG (Reuters) - Walter Radermacher wanted to be invisible, and working in his unremarkable office above a suburban shopping center in Luxembourg, the European Union's statistics chief nearly was.

But everything changed for Radermacher one October afternoon three years ago, when he received an alarming letter from Athens the day before his Eurostat statistics agency was scheduled to publish data on the state of Europe's accounts.

The letter was to transform Eurostat from a rubber-stamp organisation aggregating European statistics to a feared debt policeman with the power to search governments suspected of massaging their accounts.

These new powers are a little-known side of the growing centralisation of EU institutions over the 27 member states and the tightening of control over national budgets as they try to put an end to the three-year debt crisis that began in Greece.

"We statisticians like to be invisible, we want our products to speak. But we were immediately in the limelight," Radermacher, a bow-tie-wearing German who has headed Eurostat since 2008, told Reuters in an interview.

Back in 2009, a new Greek government had found that its predecessor lied about its borrowings and had run up huge debts.

In the letter sent to Eurostat, Greece's budget deficit was going to be 12.5 percent of economic output in 2009, not the 3.7 percent figure the previous administration had foreseen.

Greece's restatement not only destroyed the illusion that all euro zone members were equal and forced Athens into a bailout, but exposed Eurostat's inability to ensure the quality of European Union data because it lacked the power to do so.

"It was really like a tsunami," Radermacher said, recalling how he felt when he read the Greek letter notifying Eurostat of the revisions that would play a role in provoking the crisis.

The letter set Eurostat off on an unlikely course that has transformed its 800-strong team into a kind of European auditor.

Since July 2010, Eurostat has had the authority under EU law to go into countries and demand entire public sectors open their books or face being taken to the European Court of Justice, where they can be fined or punished with other sanctions.

"In the old days, we would see the problem, we would ask for clarification and we were told that the problem was not a problem and we couldn't prove the contrary," said Radermacher, who had suspicions about Greece's finances before 2009 but could not do anything about it.

"Now we can ask a finance minister: give me your pay-slip."

"SWORD OF DAMOCLES"

Those new powers were first tested in Greece in September 2010, when Eurostat sent a mission to Athens with what Radermacher describes as "having the key to open up the doors, the cupboards and the binders" of government ministries.

Over the next three months, the mission revealed the tricks used to hide Greek debt, ranging from unreported loans made by banks outside Greece to borrowings hidden by sophisticated currency swap contracts.

How Eurostat reached the final calculation of the 2009 deficit figure of 15.4 percent was controversial, however, as some Greek statisticians questioned why money-losing public utilities were added to government accounts, raising the deficit. As every extra percentage point on Greek accounts can mean more pension and salary cuts to meet the terms of Greece's international rescue loans, methodology is everything.

"We came with our team and we said we wanted to speak to all the ministers, all the hospitals and we literally went through all the big entities (of the public sector)," he said.

Radermacher sees the new powers, which have so far only been applied in Greece, as a seldom-used deterrent.

"The new powers are the sword of Damocles," he said.

Indeed, the threat may well have helped Eurostat missions over the past two years get good cooperation from Portugal and Spain.

Radermacher now talks of Eurostat's "allies" and cites excellent cooperation with Spanish officials when Eurostat inspectors went to Spain earlier this year to investigate the then new government's announcement it had inherited a worse-than-expected deficit from its predecessor.

The same was true on the Portuguese island of Madeira in 2011, after the regional government underreported its debt figures for 2010.

But even with its new clout, Eurostat's work is reliant on others.

There are some 50,000 statisticians working across the EU providing the agency with data and as Greece showed data is only as good as the people who report it.